Robert Manchel

NJ. Lawyer Explains The Chapter 7 Process

The most prevalent type of bankruptcy filing in New Jersey are Chapter 7, Chapter 13 and Chapter 11. People  refer each bankruptcy type as “chapters” because the bankruptcy code reflects the law of each chapter, in the actual chapter number of the code.  In other words, chapter 13 laws are located in chapter 13 of the bankruptcy code, which is after chapter 12 of the code.
Chapter 7 is referred to as a liquidation bankruptcy, which is intended to discharge (eliminate) certain debt. An individual person and/or a partnership, or any other corporate type entity may file for chapter 7 bankruptcy protection. Typically, individuals file for chapter 7 protection to eliminate unsecured debt, such as credit card debt and personal loans. People can also discharge (eliminate) secured loans, such as auto loans. However, if you want to  keep the collateral, such as an auto, one must continue making the monthly payments.
The chapter 7process will be complete approximately four months after the filing. When considering whether to file for bankruptcy protection, one should seek the counseling of an experienced bankruptcy lawyer. A lawyer will determine if one meets the criteria. Also, an attorney will counsel a person about the consequences of any pre-filing transfers, earned income, receipts of money  and asset values that are problematic. Maybe the debtor should wait to file, in order to save assets, or meet the criteria.
Prior to filing the bankruptcy petition with the court, each debtor must complete pre-filing credit counseling, which consists of answering questions and discussing their financial situation with a court approved counseling agent. The counseling may be completed online. The counseling takes about one and one half hours. After the counseling, the agency emails the debtor a certificate reflecting that the credit counseling is complete.
A bankruptcy petition must be completed and filed with the court, together with the counseling certificate. The petition must include household income, expenses, list of creditors and assets. One must also provide various information about property transfers and finances. After the petition is completed , the debtor must review and sign the petition. Experienced bankruptcy lawyers file the petition from their bankruptcy software. However, the petition may be filed with the clerk of court, by submitting paper documents.
A chapter 7 trustee and judge is assigned to each filed case. A trustee’s job is to determine if any property may be sold due to a substantial asset value that may not be fully exempt. Additionally, the trustee advises the judge of his recommendation as to whether a debtor should be granted a discharge of debt. The case is complete when the order of discharge is entered. However, due to atypical circumstances, the order of discharge may be delayed.
The trustee reviews the bankruptcy petition and the documents hereinafter stated: last three years of income tax returns; any and all of the debtor and spouse’s pay stubs, covering the six months prior to the filing; statements of all investments; valuation of real estate; mortgage payoff statement; child support orders; all bank statements for the six months prior to the filing; and, possibly other related documents. Lawyers typically ask for such documents prior to preparing the petition.
After the petition is filed, the court will automatically schedule a 341(a) Creditors’ Meeting before the trustee. The hearing is not in a courtroom and no judge may attend the hearing. The debtor and her attorney attend the hearing, which is located in a classroom setting. The appearance of any creditor is very unusual. Typically, the only creditors  having personal issues with the debtor, such as an ex-spouse, appear at the hearing. The trustee will ask the debtor a series of questions about their finances, assets and the information contained on the petition and above referenced documents. Typically, the judge will enter an order discharging debt in about two and one half months after the hearing.
Please note that a person may file a Reaffirmation Agreement with the court regarding their auto financing. This is explained in another part of this website. Also, although very unusual, if the there is an irresolvable issue regarding a creditor, the debtor may need to handle such matters in court. Additionally, if there are funds to distribute to creditors, which is also unusual, the trustee must provide the court with an accounting, that must obtain the court’s approval. However, under the ladder scenario, the order of discharge will not be delayed.
Contact Attorney Robert Manchel at 866 503 5644.

New Jersey Bankruptcy Lawyer Explains which specific type of debt may not be discharged in Chapter 7.

In a typical NJ. chapter 7 bankruptcy case, the debtor intends to discharge certain debt. A chapter 7 bankruptcy discharge means that the debtor is no longer personally liable and/or responsible to pay the debt. In other words, after a discharge, the creditor may never attempt to collect the money from the debtor. An exception to discharge means that a specific type of debt is not discharged and/or eliminated. If a debt is not discharged, the creditor may continue to pursue the debtor for the debt, after the completion of the bankruptcy case.

There are bankruptcy code sections that relate to the ”nondischargeability” of the whole case, including all debt. Under those code sections, if the debtor meets the criteria, he will be unable to proceed with his case and obtain any no discharge of any debt. 11 U.S.C. § 727 is the code section that prohibits a discharge of any debt under a chapter 7 bankruptcy case. However, this blog deals with the exceptions to the discharge of one debt and one creditor. Consequently, the debtor may obtain a discharge of all other debts.

If the creditor has a certain type of lien on property, the company, may possibly be permitted to pursue an action to take the collateral. Unsecured debt, such as credit card debt, does not involve any collateral and/or a lien on property. In a typical New Jersey chapter 7 bankruptcy case, the petition is filed to eliminate unsecured debt.  The bankruptcy code provides a list of debts that are specifically “excepted” from a discharge

11 U.S.C, section 523 lists the types of debt that are “excepted” from discharge. Some of the sections of 523 include debt that is automatically “excepted” from discharge if certain criteria are met. There are other portions of section 523 that are only “excepted” from discharge, if the creditor proves certain facts, in court. The ladder scenario requires the creditor to file the appropriate court documents, pursue the process and prevail in court.

The following is a list of code sections that except debt from discharge without requiring the creditor to take any additional legal or court action.

11 U.S.C, section 523, (a)(1)(A) and (B) indicates the specific taxes that are “excepted” from discharge, based on specific criteria;

11 U.S.C, section 523, (a)(3)(A) and (B) excepts from discharge the debt owed to a creditor that was not properly listed on the petition and notified in sufficient time to file a proof of claim, in connection to an asset case;

11 U.S.C, section 523, (a)(5) reflects domestic support obligations are not dischargeable. Domestic Support Obligations are typically child support, alimony payments and other maintenance payments;

11 U.S.C, section 523, (a)(7)(A)(B) covers the types of fines, penalties and taxes that are due to a governmental unit. This subsection also includes the requirement to pay back certain funds to a governmental unit;

11 U.S.C, section 523, (a)(8)(A)(B) includes the inability to discharge student loans;

11 U.S.C, section 523, (a)(9) pertains to debt arising from the death or injury of a person caused by driving while unlawfully intoxicated;

11 U.S.C, section 523, (a)(10) is the debt from a creditor that was or should have been listed in a prior case, wherein the debtor was denied or waived his discharge.

11 U.S.C, section 523, (a)(13) is a debt regarding payment of restitution under Title 18 of the U.S. Code

11 U.S.C, section 523, (a)(14) is tax owed to the U.S. that is “nondischargeable”.

11 U.S.C, section 523, (a)(14)(A) is a tax owed to a governmental unit other than the US;

11 U.S.C, section 523, (a)(14)(B) is a debt that was incurred for fines or penalties in connection with a federal election law violation;

11 U.S.C, section 523, (a)(15) reflects a debt that is due to a spouse, former spouse or child in certain circumstances that is not deemed a Domestic Support Obligation;

11 U.S.C, section 523, (a)(16) is a debt that will be due to a membership association, condominium association, homeowners association and a cooperative corporation, under certain circumstances.

11 U.S.C, section 523, (a)(17) is a fee, cost, and expense that is imposed  on a prisoner under specific situations.

11 U.S.C, section 523, (a)(18) (A) (B) pertains to a loan made against a specific retirement fund, such as a 401(k) and IRA, under the Employee Retirement Income Security Act of 1974. 

Although additional legal action, by a garden state, chapter 7 bankruptcy attorney, is typically not required, regarding the above list, one should obtain a court order, confirming that a certain debt is dischargeable. Such action should prevent future issues.

Below is a list of debt that is “nondischareable”. However, typically, additional legal action must be pursued, in bankruptcy court, to prove certain required facts necessary to deem the debt “nondischargeable”:

11 U.S.C, section 523, (a)(1)(C) indicates that a tax in connection with fraud regarding the filing of a return is not dischargeable;

11 U.S.C, section 523, (a)(2)(A)(B) is a debt, property and/or service that was obtained or incurred by fraud;

11 U.S.C, section 523, (a)(2)(C)(i)(ii) is a consumer debt, for luxury goods, in excess of $675.00, which is incurred to one creditor, within ninety (90) days, prior to the bankruptcy filing. Additionally, cash advances in excess of $950.00 incurred to one creditor, within seventy (70) days prior to the bankruptcy filing, is non dischargeable;

11 U.S.C, section 523, (a)(4) is a debt incurred by committing fraud or misappropriation of funds, while in a fiduciary capacity regarding the handling of such funds;

11 U.S.C, section 523, (a)(6) pertains to debt caused by willful and malicious injury to a person, property or entity;

11 U.S.C, section 523, (a)(11) is debt incurred or caused by fraud or the misappropriation of funds, in certain circumstances, while in a fiduciary capacity, regarding a depository institution or insured credit union;

11 U.S.C, section 523, (a)(12) is debt incurred by malicious or reckless failure to maintain the required capital of a federal depository institution.

11 U.S.C, section 524, (c) pertains to a debt in which a debtor consents to exclude from discharge. Under these circumstances, the agreement must be filed with the court and the debtor must be provided with the correct disclosures;

11 U.S.C, section 524, (k) pertains to a Reaffirmation Agreement which is an agreement between the debtor and creditor that “excepts” a debt from discharge and requires the debtor to make payments to the creditor. This type of agreement typically relates to a debt that is secured by collateral, such as an automobile. 

Contact the Garden State bankruptcy lawyer, Robert Manchel at 866 503 5644 to discuss your questions.

NJ. Attorney Explains What Happens To An Asset That Is Received During A Chapter 13 Case.

This issue deals with unexempt New Jersey bankruptcy assets. The determination as to whether an asset is exempt is always analyzed prior to a chapter 13 filing, with the assets the debtor owns at such time.  A debtor must pay to the unsecured creditors (such as credit card debt), at least the amount of the unexempt equity of any and all of his assets. I have explained how to analyze asset exemptions in numerous blogs within this website.
The bankruptcy code lists the federal exemptions in U.S.C. 11 section 522(d).  If the amount of the allowable exemption, is more than the value of any  such property, minus the secured interest, or lien, of the property, the debtor need not pay any funds toward the unsecured debt, as a result of owning such property. An example of a secured lien is a mortgage on a house, or financing on an auto. However, if the exemption amount that is applied to such property is less than the equity in a particular property, the debtor must pay the portion of the value of each asset that is unexempt, towards the total unsecured debt. This analysis must be performed for each and every asset and it’s relevant allowable exemption amount.
The following is an example of a person filing for chapter 13 bankruptcy protection in New Jersey. Based on the equity in the house, alone, the debtor must pay at least the unexempt amount of $9,325.00 towards the total amount of unsecured debt. Please note that the debtor may be required to pay more, based on the value of other property and the amount of the monthly household disposable income.
Value of House is                                                                                                                   $370,000.00
minus mortgage payoff balance                                                                                        -$300,000.00
equals                                                                                                                                        $70,000
minus allowable 10% cost of sale which may be deducted for real estate                -$37,000.00
balance                                                                                                                                     $33,000.00
minus allowable exemption for each person who owns a house                                -$23,675.00
balance                                                                                                                                     $9,325.00
The following code section deals with property that the debtor acquires after the chapter 13 bankruptcy case is filed.
Ҥ 1306. Property of the estate

NJ Bankruptcy Lawyer Explains What “Abandonment” Means Regarding A Chapter 7 Bankruptcy Case.

If a chapter 7 debtor owns real estate, the trustee must determine if he can sell or abandon his right to the property. The trustee will perform a liquidation analysis to determine if there is sufficient equity in the real estate that will allow her to sell the property. If the trustee determines that the real estate has no value or inconsequential value to the bankruptcy estate, she must notify the court of same. The trustee’s notice to the court that she is abandoning her right to the real estate, is called a, Notice Of Proposed Abandonment.
The trustee abandoning real estate is good for the debtor, not bad. This means that the trustee does not want anything to do with the property and she is abandoning her right to the property. This does not mean that the debtor must abandon the property. When the trustee abandons her right to the property, the property comes out of the bankruptcy estate and vests with the home owner(s).
What is the reason for such notice? The trustee is required to forward the proper notice to the court, with a copy to the debtor and all interested parties. Although extremely unusual, any party has a right to file an objection to the trustee’s right to abandon the real estate. If no objection is filed with the court upon a certain date, the abandonment takes effect, prior to the scheduled court date.
The details of a liquidation analysis is explained within this website in another blog. If the debtors’ allowable exemptions exceed the fair market value of the house, minus 10% cost of sale, minus all non-avoidable secured liens, the trustee may not sell the debtors’ house. The following is an example of a liquidation analysis, in connection with a married couple filing a joint chapter 7 case, in which both spouses own the real estate, where they reside.
fair market value of the house                                                                                 $310,000.00
(minus) the only mortgage payoff amount                                                           $240,000.00
balance                                                                                                                         $70,000.00
(minus allowable 10% cost of sale)(10% of $310,000.00)                                $31,000.00
balance                                                                                                                         $39,000.00
(minus the allowable exemptions- up to $23,675.00 for each spouse)          $39,000.00 ( could use up to $47,350.00 for both spouses)
balance                                                                                                                         $0.00
In the example above, the spouses could have applied $23,675.00 each, or up to $47,350.00, for both of them. Therefore in the above example, the trustee would not be permitted to sell the house and must abandon her interest in the house. Please note that the debtors and their attorneys should be aware of the liquidation analysis prior to the bankruptcy filing.
Please do not rely on this blog. You must contact your attorney to discuss this very important matter.
Contact Robert Manchel, at 866 503 5644,  to discuss how bankruptcy works.